I can give you a text book definition, but to be honest, it’s far from the truth.
Rather than fire off a blanket text about what it is, with no foundation or premise, it would be prudent for me to paint a picture and then answer the question… What Is Money?
The true definition of Money
Money is a medium of exchange, it’s a tangible, valuable and trusted substance or object which is perceived to have value to the masses.
Money has value in itself and of itself, that is to say, as a default substance, on a stand alone basis, or intrinsically, it has some measure and store of value.
Examples could be:
- A mobile phone – say an IPhone.
- It is internationally recognised
- It is valuable – as it contains very expensive parts such as gold and silver components
- It is valuable as tool
- people would say their lives depend on it or couldn’t live without it
- You could sell an Iphone and make money on the purchase so it can be leveraged.
- Only Apple can replicate an Iphone, no one else.
- The Iphone is a Physical, tangible item
- It is immediately recognisable
- Like the Iphone or Hate it, you wouldn’t flush it down the toilet – it has some use and benefit
- The Iphone can now be used to make payments and has it’s own brand – Applepay.. A Currency (more on this later)
- The Iphone is extremely popular
So I have listed twelve points above that hopefully makes my point clear of highlighting tangibility, intrinsic value or store or value and that there is a demand for such an item on a mass scale.
I would refer to the Iphone, in the context of this article and example, as the ‘modern day Gold’.
Just like the Iphone analogy, the concept of money being a transnational physical tool was first utilised thousands of years ago and the most famous form of ‘money’ was the use of gold and silver. However, Tulips were used once upon a time as well as sea shells and other items perceived valuable.
Money is Currency but Currency is NOT Money!
So I mentioned earlier that Money represents a transfer and store of value and has intrinsic value. The big question then, is this…
Is our current Pound or Dollar Notes actually Money? What do you think?
Let’s break it down (please, what ever you read in this article, do not take my word for it, do your own research and make up your own mind) …
- The value of the paper used in the mint which we utilise as ‘money’ or cash today cost about a penny may be 2p.
- The Ink costs, I would say is more expensive than the paper
- Paper is everywhere, and now, with the introduction of Plastic, it would be very difficult to qualify paper or plastic as valuable (in comparison to the Iphone example above)
- The fact that the Notes state word to the following effect: ‘I Promise To Pay…’ I think it’s far enough to say it is not the actual money if there’s a promise to pay attached.
So paper’Money’ is not:
- a Store of Value
- Has no Intrinsic value or value in and of itself
- Is pretty much worthless on the face of everything
- I would strongly argue that Paper ‘Money’ is NOT Money but it is Currency
What is Currency?
Currency is a tool utilised to TRANSFER value or energy from one means to another. You can liken Currency to electric current or Sea Current where it has to keep moving else the water becomes stagnant (dead/ lifeless) and the electricity ceases to be transferred (remember energy can not be created or destroyed it just changes form)
So the paper notes (cash, digits on a screen, bonds etc), as would be implied by the term ‘ I promise to pay’ is just transferring something of value from one means to the next, changing hands all the time.
I would highly recommend you watch the video below called ‘Money as Debt’ as this will give you a good foundation of what I have explained above and will also start to reveal how Banks became banks, and how money became currency. It will set the president for my next section of the article, please do not skip!
If you enjoyed what you have read and watched above and want to learn more relating to the subject of Money and the Banking system and importantly then I highly encourage you to access my special training called Common Sense Money Management (Click here for more information)
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